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After a decent first half, the drug and biotech sector saw a major downturn in the second half due to disappointing third-quarter sales and profits, guidance cuts, pipeline setbacks and the appointment of Robert F. Kennedy Jr., a vaccine skeptic, as the head of Health and Human Services.
Nonetheless, innovation is at its peak for the industry, with key spaces like diabetes/obesity, gene therapy, inflammation and neuroscience attracting investor attention. FDA approvals continued at a rapid pace throughout 2024. The FDA approved 46 drugs (as of Dec. 13), which is in line with the annual average of 45 to 50 approvals. R&D innovation is likely to remain a major focus area in 2025 as well.
In this article, we discuss five of the most enthralling biotech breakthrough stocks for those investors who are looking to diversify away from traditional pharmaceuticals. These stocks are Mind Medicine (MindMed) MNMD, Beam Therapeutics BEAM, Arcellx ACLX, Ocugen OCGN and Insmed INSM. These companies have novel pipeline candidates in their portfolio with the potential to revolutionize medicine by their differentiated mechanism of action.
With R&D costs for innovative research efforts being significantly higher, most of these companies are reporting losses, as of now. However, if their drugs are successfully developed and commercialized, the companies may see astronomical revenues. It is, therefore, a good idea to keep an eye on these stocks as they may give great returns in the next 2-3 years. Investors, at the same time, should keep in mind that investing in these biotech stocks is risky as either these companies make it or don’t, depending on whether the FDA approves their innovative medicines.
These five stocks have a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A chart showing the share price movement of the five stocks is given below. All the stocks have outperformed the industry’s decline of 13.7% so far this year.
Zacks Investment Research
Image Source: Zacks Investment Research
Mind Medicine (MindMed)
MindMed is developing its lead pipeline candidate MM120 orally disintegrating tablet (ODT), a pharmaceutically optimized form of lysergide D-tartrate (LSD), in the 52-week phase III Voyage study for the treatment of generalized anxiety disorder (GAD). Top-line data from a 12-week study is anticipated in the first half of 2026. Voyage is the first of the two-phase III studies to be conducted on MM120 ODT in GAD. The second phase III study called Panorama is expected to be initiated in the first half of 2025.
The FDA has also granted a breakthrough therapy designation to MM120 for treating GAD, a debilitating mental health condition where there is an urgent need for transformational innovation with the last new drug approval occurring in 2007. Earlier data from the phase II study on MM120 ODT demonstrated efficacy that far exceeded the current standard of care and a favorable tolerability profile.
Another phase III study of MM120 ODT in major depressive disorder is expected to be initiated in the first half of 2025.
Beam Therapeutics
Beam believes that its innovative next-generation technology called base-editing technology can provide a superior way to modify genes and could open up entirely new applications in gene editing for a wide range of severe diseases. It can make more precise single-base changes at specific locations in genes, resulting in predictable edits in all cells, without needing to damage or make double stranded breaks in the DNA.
Beam Therapeutics’ lead pipeline candidate, BEAM-101, a base-editing therapy, is being developed in the phase I/II BEACON study for treating sickle cell disease, an inherited blood disorder. Initial data from the BEACON study supported the potential for meaningful clinical differentiation of BEAM-101 as compared to currently available treatments for SCD. The data showed that treatment with BEAM-101 led to a robust and durable increase in fetal hemoglobin (HbF) of more than 60% and a reduction in sickle hemoglobin (HbS) to less than 40%.
Besides BEAM-101, BEAM is also expanding its pipeline for liver genetic diseases. Its lead candidate here is BEAM-301 for treating alpha-1 antitrypsin deficiency (AATD). It expects to report the first clinical data from its ongoing phase I/II study of BEAM-302 in patients with AATD in 2025.
2025 is expected to be a catalyst-rich year for Beam, with a strong cash position supporting further development of its hematology and liver genetic disease programs.
Arcellx
Arcellx in collaboration with Gilead is co-developing anito-cel as a potentially best-in-class CAR-T therapy for relapsed or refractory multiple myeloma or RRMM. Anito-cel is currently being developed in a phase II registrational pivotal study, iMMagine-1, for RRMM.
Recent data from a phase I study demonstrated 30.2-month median progression-free survival in a challenging patient cohort. Earlier, the company had also announced deep and durable responses and manageable safety in a high-risk fourth-line or higher (4L+) RRMM population from the iMMagine-1 study. Both the phase I and iMMagine-1 studies demonstrated the candidate’s high tolerability, where notably, no delayed neurotoxicities were observed in the over 140 patients treated to date. The data shows that anito-cel has the potential to disrupt the multiple myeloma market.
Ocugen
Ocugen is making rapid progress in its gene therapy programs for retinal diseases, which have differentiated mechanisms of action.
Enrollment is ongoing in a phase III liMeliGhT study on lead modifier gene therapy candidate, OCU400 to treat retinitis pigmentosa (RP), a rare genetic disorder that can lead to vision loss and blindness. Enrollment in the study is on track to be completed in the first half of 2025. The FDA has granted orphan drug designation to OCU400 for treating RP.
RP disease is associated with mutations in more than 100 genes. Per the company, there is only a single marketed product to treat one of the 100 gene mutations associated with RP. The gene-agnostic mechanism of action for OCU400 provides hope to reach a much larger segment of the RP patient population.
Ocugen’s other important candidate, OCU410, is being developed as a one-time gene therapy for treating geographic atrophy (GA), an advanced stage of dry age-related macular degeneration (dAMD). Phase II expansion portion of the phase I/II ArMaDa study is underway. Preliminary data from the study showed that OCU410 slowed lesion growth, preserved retinal tissue and stabilized visual function.
Currently patients with GA in the United States have only one option available, an anti-complement therapy, which requires multiple injections and only addresses one aspect of the disease. Ocugen believes that OCU410 addresses multiple aspects of the disease beyond the complement pathway and has the potential to change the treatment paradigm for GA.
Insmed
Insmed’s most advanced pipeline candidate is brensocatib, which is being developed as a potential treatment for multiple neutrophil-driven inflammatory conditions. In May 2024, management reported positive top-line results from the late-stage ASPEN study, which evaluated brensocatib in patients with bronchiectasis. Treatment with the drug achieved statistically significant and clinically meaningful reductions in the annualized rate of pulmonary exacerbations (or episodes of worsening disease symptoms) compared with placebo. These results highlight the potential of brensocatib as a new standard of care in bronchiectasis indication. Based on these results, Insmed expects to submit a regulatory filing for brensocatib in bronchiectasis shortly.
If approved, brensocatib will be the first approved treatment for bronchiectasis. Management expects a commercial launch for the drug in the United States in mid-2025, followed by product launches in Europe and Japan in 2026. Given that there are currently no approved therapies to treat this disorder, we expect the drug to have a blockbuster potential.
The candidate is also being evaluated in separate clinical studies for other neutrophil-driven inflammatory conditions like chronic rhinosinusitis without nasal polyps (CRSsNP) and hidradenitis suppurativa. Top-line data from the phase IIb BiRCh study in CRSsNP is expected in the second half of 2025.
Sales of Insmed’s sole marketed drug, Arikayce, for treating refractory mycobacterium avium complex lung disease, have been growing steadily. Insmed is also conducting late-stage studies to expand Arikayce’s label and to treat newly-infected patients.
The company is also evaluating another pipeline drug, treprostinil palmitil inhalation powder, in separate mid-stage studies for pulmonary hypertension associated with interstitial lung disease and pulmonary arterial hypertension indications.
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